Federal Register / Vol. 77, No. 95 / Wednesday, May 16, 2012 / Proposed Rules 28819 

1 7 U.S.C. 6(c). 

2Section 712(d)(1) provides: ‘‘Notwithstanding 

any other provision of this title and subsections (b) 

and (c), the Commodity Futures Trading 

Commission and the Securities and Exchange 

Commission, in consultation with the Board of 

Governors [of the Federal Reserve System], shall 

further define the terms ‘swap’, ‘security-based 

swap’, ‘swap dealer’, ‘security-based swap dealer’, 

‘major swap participant’, ‘major security-based 

swap participant’, and ‘security-based swap 

agreement’ in section 1a(47)(A)(v) of the 

Commodity Exchange Act (7 U.S.C. 1a(47)(A)(v)) 

and section 3(a)(78) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)(78)).’’ 

3Section 721(c) provides: ‘‘To include 

transactions and entities that have been structured 

to evade this subtitle (or an amendment made by 

this subtitle), the Commodity Futures Trading 

Commission shall adopt a rule to further define the 

terms ‘swap’, ‘swap dealer’, ‘major swap 

participant’, and ‘eligible contract participant’.’’ 

4Effective Date for Swap Regulation, 76 FR 42508 

(issued and made effective by the Commission on 

July 14, 2011; published in the Federal Register on 

July 19, 2011). Section 712(f) of the Dodd-Frank Act 

states that ‘‘in order to prepare for the effective 

dates of the provisions of this Act,’’ including the 

general effective date set forth in section 754, the 

Commission may ‘‘exempt persons, agreements, 

contracts, or transactions from provisions of this 

Act, under the terms contained in this Act.’’ Section 

754 specifies that unless otherwise provided in 

Title VII, provisions requiring a rulemaking become 

effective ‘‘not less than 60 days after publication of 

the final rule’’ (but not before July 16, 2011). 

5Concurrent with the July 14 Order, the 

Commission’s Division of Clearing and 

Intermediary Oversight (which is now two 

divisions—the Division of Clearing and Risk 

(‘‘DCR’’) and the Division of Swap Dealer and 

Intermediary Oversight (‘‘DSIO’’)) and the Division 

of Market Oversight (‘‘DMO’’) (together ‘‘the 

Continued 

with appliance functionality other than 

cooking or heating food, the average standby 

power, PSB, and average off mode power, PO, 

of the microwave oven portion shall be 

determined as for microwave/conventional 

ovens, microwave/conventional cooking 

tops, and microwave/conventional ranges, 

except that manufacturers must submit data 

to DOE that DOE shall use to determine the 

values of the apportionment factors, FSBM

and FOM, as defined in section 4.3.2 of this 

appendix, for that particular model of 

combined product. 

[FR Doc. 2012–11730 Filed 5–15–12; 8:45 am] 

BILLING CODE 6450–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Chapter 1 

Second Amendment to July 14, 2011 

Order for Swap Regulation 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of Proposed Amendment. 

SUMMARY: On July 14, 2011, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or the 

‘‘Commission’’) issued a final order 

(‘‘July 14 Order’’) that granted 

temporary exemptive relief from certain 

provisions of the Commodity Exchange 

Act (‘‘CEA’’) that otherwise would have 

taken effect on the general effective date 

of title VII of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (the ‘‘Dodd-Frank Act’’)—July 16, 

2011. On December 23, 2011, the 

Commission amended the July 14 Order 

to extend the potential latest expiration 

date of the July 14 Order from December 

31, 2011 to July 16, 2012, and added 

provisions to account for the repeal and 

replacement (as of December 31, 2011) 

of part 35 of the Commission’s 

regulations (the ‘‘First Amended July 14 

Order’’). In this Notice of Proposed 

Amendment (‘‘Notice’’), the 

Commission proposes to further modify 

the temporary exemptive relief provided 

in the First Amended July 14 Order by: 

(1) Removing references to the entities 

terms, including ‘‘swap dealer,’’ ‘‘major 

swap participant,’’ and ‘‘eligible 

contract participant’’ in light of the 

final, joint CFTC–SEC rulemaking 

further defining them issued on April 

18, 2012; (2) extending the potential 

latest expiration date of the July 14 

Order to December 31, 2012, or, 

depending on the nature of the relief, 

such other compliance date as may be 

determined by the Commission; (3) 

allowing the clearing of agricultural 

swaps, as described herein; and (4) 

removing any reference to the exempt 

commercial market (‘‘ECM’’) and 

exempt board of trade (‘‘EBOT’’) 

grandfather relief previously issued by 

the Commission. Only comments 

pertaining to these proposed 

amendments to the First Amended July 

14 Order, as amended (the ‘‘Second 

Amended July 14 Order’’), will be 

considered. 

DATES: Submit comments on or before 

May 30, 2012. 

ADDRESSES: Comments may be 

submitted, referenced as ‘‘Effective Date 

Amendments,’’ by any of the following 

methods: 

• Agency Web site, via its Comments 

Online process at http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to www.cftc.gov. You 

should submit only information that 

you wish to make available publicly. If 

you wish the Commission to consider 

information that may be exempt from 

disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the established procedures in § 145.9 

of the Commission’s regulations, 17 CFR 

145.9. 

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from www.cftc.gov that it may deem to 

be inappropriate for publication, such as 

obscene language. All submissions that 

have been redacted or removed that 

contain comments on the merits of the 

rulemaking will be retained in the 

public comment file and will be 

considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Mark D. Higgins, Counsel, (202) 418– 

5864, mhiggins@cftc.gov, Office of the 

General Counsel; David Van Wagner, 

Chief Counsel, (202) 418–5481, 

dvanwagner@cftc.gov, Division of 

Market Oversight; Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581; or Anne Polaski, 

Special Counsel, (312) 596–0575, 

apolaski@cftc.gov, Division of Clearing 

and Risk; Commodity Futures Trading 

Commission, 525 West Monroe, 

Chicago, Illinois 60661. 

SUPPLEMENTARY INFORMATION: 

On July 14, 2011, the Commission 

exercised its exemptive authority under 

CEA section 4(c) 1 and its authority 

under section 712(f) of the Dodd-Frank 

Act by issuing a final order (the ‘‘July 

14 Order’’) that addressed the potential 

that the final, joint CFTC–SEC 

rulemakings further defining the terms 

in sections 712(d) 2 and 721(c) 3 would 

not be in effect as of July 16, 2011 (i.e., 

the general effective date set forth in 

section 754 of the Dodd-Frank Act).4 In 

so doing, the Commission sought to 

address concerns that had been raised 

about the applicability of various 

regulatory requirements to certain 

agreements, contracts, and transactions 

after July 16, 2011, and thereby ensure 

that current practices would not be 

unduly disrupted during the transition 

to the new regulatory regime.5

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28820 Federal Register / Vol. 77, No. 95 / Wednesday, May 16, 2012 / Proposed Rules 

Divisions’’) identified certain provisions of the 

Dodd-Frank Act and CEA as amended that would 

take effect on July 16, 2011, but that may not be 

eligible for the exemptive relief provided by the 

Commission in its July 14 Order—specifically, the 

amendments made to the CEA by Dodd-Frank Act 

sections 724(c), 725(a), and 731. On July 14, 2011, 

the Divisions issued Staff No-Action Relief 

addressing the application of these provisions after 

July 16, 2011. Available at: http://www.cftc.gov/ 

ucm/groups/public/@lrlettergeneral/documents/ 

letter/11-04.pdf. 

6Amendment to July 14, 2011 Order for Swap 

Regulation, 76 FR 80233 (Dec. 23, 2011). 

7The Commission clarified that while the 

exemption set forth in the second part of the First 

Amended July 14 Order generally shall expire upon 

the earlier of July 16, 2012 or such other 

compliance date as may be determined by the 

Commission, it modified that alternative condition 

to provide that the exemption will not expire prior 

to July 16, 2012 in certain circumstances. 

Specifically, the Commission stated that no other 

compliance date will be determined (and thus, the 

exemption will remain in effect until July 16, 2012) 

for agreements, contracts, and transactions (and for 

persons offering, entering into, or rendering advice 

or rendering other services with respect to, such 

agreements, contracts or transactions) that: (1) Are 

executed on an ECM or EBOT that is operating 

under the terms of the Commission’s Order 

Regarding the Treatment of Petitions Seeking 

Grandfather Relief for Exempt Commercial Markets 

and Exempt Boards of Trade, 75 FR 56513, Sept. 16, 

2010 (the ECM/EBOT Grandfather Order’’), and that 

complies with all of the applicable conditions of the 

ECM/EBOT Grandfather Order; and (2) are cleared 

by a Commission-registered derivatives clearing 

organization (‘‘DCO’’). Concurrent with the First 

Amended July 14 Order, the Divisions also issued 

a new staff no-action letter further addressing the 

applicability of the amendments made to the CEA 

by Dodd-Frank Act sections 724(c), 725(a), and 731. 

The Commission staff has informed the 

Commission that it is separately considering 

whether to issue a no-action letter in which the staff 

would state that it would not recommend that the 

Commission commence an enforcement action 

against markets or market participants for failure to 

comply with the above-referenced provisions over 

a period of time co-extensive with that set forth in 

the Second Amended July 14 Order, as proposed 

herein. 

8The Commission promulgated a rule pursuant to 

section 723(c)(3) of the Dodd-Frank Act, and CEA 

sections 4(c) and 4c(b), that, effective December 31, 

2011, repealed the existing part 35 relief and 

replaced it with new § 35.1 of the Commission’s 

regulations. See Agricultural Swaps, 76 FR 49291 

(Aug. 10, 2011). Rule 35.1 generally provides that 

‘‘agricultural swaps may be transacted subject to all 

provisions of the CEA, and any Commission rule, 

regulation or order thereunder, that is otherwise 

applicable to swaps. [It] also clarifies that by issuing 

a rule allowing agricultural swaps to transact 

subject to the laws and rules applicable to all other 

swaps, the Commission is allowing agricultural 

swaps to transact on [designated contract markets 

(‘‘DCMs’’), swap execution facilities (‘‘SEFs’’)], or 

otherwise to the same extent that all other swaps 

are allowed to trade on DCMs, SEFs, or otherwise.’’ 

Id. at 49296. 

9As proposed, the Second Amended July 14 

Order. 

10CFTC–SEC, Further Definition of ‘‘Swap 

Dealer’’, ‘‘Security-Based Swap Dealer’’, ‘‘Major 

Swap Participant’’, ‘‘Major Security-Based Swap 

Participant’’, and ‘‘Eligible Contract Participant’’ 

(issued Apr. 18, 2012) (to be codified at 17 CFR pt. 

1), available at: http://www.cftc.gov/ucm/groups/ 

public/@newsroom/documents/file/ 

federalregister041812b.pdf. 

11 7 U.S.C. 6(c). 

12See December 23 Order, 76 FR at 80236, note 

11 (Dec. 23, 2011). 

13See 17 CFR 35.1(b). 

14See 76 FR at 80236, note 22 (Dec. 23, 2011). 

15 17 CFR 40.2. 

16 17 CFR 40.3. 

17See 7 U.S.C. 5(d)(11)(A). 

For those same reasons, on December 

23, 2011, the Commission published in 

the Federal Register a final order, the 

First Amended July 14 Order, amending 

the July 14 Order in two ways.6 First, 

the Commission extended the potential 

latest expiry date from December 31, 

2011 to July 16, 2012 or, depending on 

the nature of the relief, such other 

compliance date as may be determined 

by the Commission,7 to address the 

potential that, as of December 31, 2011, 

the aforementioned joint CFTC– 

Securities and Exchange Commission 

(‘‘SEC’’) joint rulemakings would not be 

effective. Second, the Commission 

included within the relief set forth in 

the First Amended July 14 Order any 

agreement, contract or transaction that 

fully meets the conditions in part 35 as 

in effect prior to December 31, 2011. 

This amendment addressed the fact that 

such transactions, which were not 

included within the scope of the 

original July 14 Order because the 

exemptive rules in part 35 covered them 

at that time, required temporary relief 

because part 35 would not be available 

as of December 31, 2011.8 In so doing, 

the Commission clarified that new part 

35 and the exemptive relief issued in 

the First Amended July 14 Order, and 

any interaction of the two, do not 

operate to expand the pre-Dodd-Frank 

Act scope of transactions eligible to be 

transacted on either an ECM or EBOT to 

include transactions in agricultural 

commodities. 

In this Notice, the Commission is 

proposing to further amend the First 

Amended July 14 Order in the following 

four ways.9 First, in light of the final, 

joint CFTC–SEC rulemaking further 

defining the entities terms in sections 

712(d), including ‘‘swap dealer,’’ ‘‘major 

swap participant,’’ and ‘‘eligible 

contract participant,’’ issued on April 

18, 2012,10 the Commission is removing 

references to those terms in this 

proposed Second Amended July 14 

Order. Second, the Commission is 

proposing to extend the latest potential 

expiry date from July 16, 2012 to 

December 31, 2012 or, depending on the 

nature of the relief, such other 

compliance date as may be determined 

by the Commission. The extension 

would ensure that market practices will 

not be unduly disrupted during the 

transition to the new regulatory regime. 

Third, the Commission is proposing 

to further amend the First Amended 

July 14 Order to provide that 

agricultural swaps, whether entered into 

bilaterally, on a DCM, or a SEF, may be 

cleared in the same manner that any 

other swap may be cleared and without 

the need for the Commission to issue 

any further exemption under section 

4(c) of the CEA.11 This amendment is 

intended to harmonize the First 

Amended July 14 Order and the final 

rules amending part 35 of the 

Commission’s regulations, to the extent 

that the July 14 Order, as amended, 

maintained the pre-Dodd-Frank part 35 

prohibition against the clearing of 

agricultural swaps. While the proposed 

Second Amended July 14 Order would 

remove the clearing prohibition for 

agricultural swaps, this proposal would 

not permit agricultural swaps to be 

entered into or executed on an ECM or 

EBOT. The Commission notes that 

ECMs and EBOTs both operate some 

form of trading facility without any selfregulatory responsibilities. The 

Commission generally believes that any 

form of exchange trading in agricultural 

swaps should only be permitted in a 

self-regulated environment. In other 

words, unlike exempt and excluded 

commodities, which were allowed to be 

transacted on a trading facility (i.e., 

platform-traded) in an unregulated 

environment under the CEA prior to the 

Dodd-Frank Act and now during the 

transition to the Dodd-Frank Act 

regulatory regime, agricultural swaps, 

which were not allowed to be platformtraded on an ECM or EBOT under the 

CEA prior to Dodd-Frank Act, may not 

be platform-traded during the transition 

to the Dodd-Frank Act regulatory 

regime. Accordingly, under this 

proposed amendment and in 

conjunction with 17 CFR part 35, as 

effective on and after December 31, 

2011, the Commission confirms that 

agricultural swaps may only be entered 

into or executed bilaterally, on a DCM,12

or on a SEF.13

In connection with swaps executed on 

a DCM (whether agricultural swaps or 

otherwise), the Commission clarifies 

that a DCM may list such swaps for 

trading under the DCM’s rules related to 

futures contracts without exemptive 

relief.14 As required for futures, a DCM 

must submit such swaps to the 

Commission under either § 40.2 (listing 

products for trading by certification) 15

or § 40.3 (voluntary submission of new 

products for Commission review and 

approval) 16 of the Commission’s 

regulations. Swaps that are traded on a 

DCM are required to be cleared by a 

DCO.17 In order for a DCO to be able to 

clear a swap listed for trading on a 

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Federal Register / Vol. 77, No. 95 / Wednesday, May 16, 2012 / Proposed Rules 28821 

18 17 CFR 39.5(a). 

19 17 CFR 39.5(b). 

20The Commission issued the ECM/EBOT 

Grandfather Order pursuant to Sections 723(c) and 

734(c) of the Dodd-Frank Act which authorized the 

Commission to permit ECMs and EBOTs 

respectively to continue to operate pursuant to CEA 

Sections 2(h)(3) and 5d for no more than one year 

after the general effective date of the Dodd-Frank 

Act’s amendments to the CEA. 

21The Commission currently receives notice 

filings from ECMs and EBOTs, and thus has a 

general familiarity with the nature and number of 

markets operating pursuant to ECM and EBOT 

exemptive relief. See 17 CFR 36.2(b) and 17 CFR 

36.3(a). In order for the Commission to gain a 

similar familiarity with 2(d)(2) Markets, and to 

facilitate their eventual transition to registered DCM 

or registered SEF status, the Commission strongly 

encourages 2(d)(2) Markets intending to operate 

pursuant to the exemptive relief proposed in this 

Second Amended Order to provide the Commission 

with notice of their operations (or intent to so 

operate) on or before July 16, 2012, or as reasonably 

soon thereafter as is practicable. Any such notice 

should be sent to the Commission’s Division of 

Market Oversight, 1155 21st St. NW., Washington, 

DC 20581 (or electronically, to 

DMOLetters@cftc.gov), and should include the 

name and address of the 2(d)(2) Market, and the 

name and telephone number of a contact person. 

The Commission anticipates that such notice will 

assist the Commission in its preparation to review 

any subsequent application for registration, or 

provisional registration, as a SEF or DCM submitted 

by such 2(d)(2) Market. Notwithstanding the 

provision of such notice, the Commission notes that 

any subsequent SEF or DCM registration 

application by a 2(d)(2) Market will still undergo a 

separate, complete, and independent evaluation by 

the Commission, just as will every SEF and/or DCM 

application submitted by an ECM and/or EBOT. 

22For these purposes, an application is 

‘‘provisionally approved’’ on the date that such 

provisional approval becomes effective such that 

the ECM, EBOT, or 2(d)(2) Market may then rely on 

such provisional approval to operate as a DCM or 

SEF, as applicable. 

23 44 U.S.C. 3507(d). 

24 7 U.S.C. 19(a). 

DCM, the DCO must be eligible to clear 

such swap pursuant to § 39.5(a)(1) or 

(2),18 and must submit the swap to the 

Commission pursuant to § 39.5(b).19

Fourth, the Commission is proposing 

to further amend the First Amended 

July 14 Order to remove any reference 

to the ECM/EBOT Grandfather Order, 

which expires on July 16, 2012.20 After 

July 16, 2012, ECMs and EBOTs, as well 

as markets that rely on pre-Dodd-Frank 

CEA section 2(d)(2) (‘‘2(d)(2) Markets’’), 

will only be able to rely on the Second 

Amended July 14 Order, as proposed 

herein. The relief for ECMs and EBOTs, 

as well as for 2(d)(2) Markets, granted 

under the proposed Second Amended 

July 14 Order shall expire upon the 

effective date of the DCM or SEF final 

rules, whichever is later, unless the 

ECM or EBOT, or 2(d)(2) Markets, files 

a DCM or SEF application on or before 

the effective date of the DCM or SEF 

final rules, in which case the relief shall 

remain in place during the pendency of 

the application.21 For these purposes, an 

application will be considered no longer 

pending upon the application being 

approved, provisionally approved,22

withdrawn, or denied. 

The Commission seeks comment on 

all aspects of this proposal. 

Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 23 imposes certain 

requirements on Federal agencies 

(including the Commission) in 

connection with conducting or 

sponsoring any collection of 

information as defined by the PRA. The 

proposed Second Amended July 14 

Order will not require a new collection 

of information from any persons or 

entities that will be subject to the final 

order. 

B. Cost-Benefit Considerations 

Section 15(a) of the CEA 24 requires 

the Commission to consider the costs 

and benefits of its action before issuing 

an order under the CEA. CEA section 

15(a) further specifies that costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. 

The Commission proposes that there 

are no significant, if any, costs 

associated with this proposed 

amendment. This is so because the 

proposed order is permissive—that is, it 

provides additional time beyond that 

provided for in the First Amended July 

14 Order for persons to comply with any 

substantive or administrative 

requirements being imposed elsewhere. 

The Commission further proposes 

that, as discussed above, the primary 

benefits of this proposal include that it 

ensures that market practices will not be 

unduly disrupted during the transition 

to the new regulatory regime, and 

removes any actual or perceived 

inconsistency between Commission 

orders and rules with regard to 

agricultural swaps. 

The Commission requests comments 

on the consideration of costs and 

benefits of the proposed amendments 

discussed in this Notice. 

Proposed Second Amended July 14 

Order 

The Commission proposes a Second 

Amended July 14 Order to read as 

follows: 

The Commission, to provide for the 

orderly implementation of the 

requirements of Title VII of the DoddFrank Act, pursuant to sections 4(c) and 

4c(b) of the CEA and section 712(f) of 

the Dodd-Frank Act, hereby issues this 

Order consistent with the 

determinations set forth above, which 

are incorporated in this final order, as 

amended, by reference, and: 

(1) Exempts, subject to the conditions 

set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, as added or amended by the DoddFrank Act, that reference one or more of 

the terms regarding instruments subject 

to further definition under sections 

712(d) and 721(c) of the Dodd-Frank 

Act, which provisions are listed in 

Category 2 of the Appendix to this 

Order; provided, however, that the 

foregoing exemption: 

a. Applies only with respect to those 

requirements or portions of such 

provisions that specifically relate to 

such referenced terms; and 

b. With respect to any such provision 

of the CEA, shall expire upon the earlier 

of: (i) The effective date of the 

applicable final rule further defining the 

relevant term referenced in the 

provision; or (ii) December 31, 2012. 

(2) Agricultural Commodity Swaps. 

Exempts, subject to the conditions set 

forth in paragraph (4), all agreements, 

contracts, and transactions in an 

agricultural commodity, and any person 

or entity offering, entering into, or 

rendering advice or rendering other 

services with respect to, any such 

agreement, contract, or transaction, from 

the provisions of the CEA, if the 

agreement, contract, or transaction 

complies with part 35 of the 

Commission’s regulations as in effect 

prior to December 31, 2011, including 

any agreement, contract, or transaction 

that complies with such provisions then 

in effect notwithstanding that: 

a. The agreement, contract, or 

transaction may be part of a fungible 

class of agreements that are 

standardized as to their material 

economic terms; and/or 

b. The creditworthiness of any party 

having an actual or potential obligation 

under the agreement, contract, or 

transaction would not be a material 

consideration in entering into or 

determining the terms of the agreement, 

contract, or transaction i.e., the 

agreement, contract, or transaction may 

be cleared. 

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28822 Federal Register / Vol. 77, No. 95 / Wednesday, May 16, 2012 / Proposed Rules 

This exemption shall expire upon the 

earlier of (i) December 31, 2012; or (ii) 

such other compliance date as may be 

determined by the Commission. 

(3) Exempt and Excluded Commodity 

Swaps. Exempts, subject to the 

conditions set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, if the agreement, contract, or 

transaction complies with part 35 of the 

Commission’s regulations as in effect 

prior to December 31, 2011, including 

any agreement, contract, or transaction 

in an exempt or excluded (but not 

agricultural) commodity that complies 

with such provisions then in effect 

notwithstanding that: 

a. The agreement, contract, or 

transaction may be executed on a 

multilateral transaction execution 

facility; 

b. The agreement, contract, or 

transaction may be cleared; 

c. Persons offering or entering into the 

agreement, contract or transaction may 

not be eligible swap participants, 

provided that all parties are eligible 

contract participants as defined in the 

CEA prior to the date of enactment of 

the Dodd-Frank Act; 

d. The agreement, contract, or 

transaction may be part of a fungible 

class of agreements that are 

standardized as to their material 

economic terms; and/or 

e. No more than one of the parties to 

the agreement, contract, or transaction is 

entering into the agreement, contract, or 

transaction in conjunction with its line 

of business, but is neither an eligible 

contract participant nor an eligible swap 

participant, and the agreement, contract, 

or transaction was not and is not 

marketed to the public; 

Provided, however, that: 

a. Such agreements, contracts, and 

transactions in exempt or excluded 

commodities (and persons offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction) fall within the scope of any 

of the CEA sections 2(d), 2(e), 2(g), 2(h), 

and 5d provisions or the line of business 

provision as in effect prior to July 16, 

2011; and 

b. This exemption shall expire upon 

the earlier of: (i) December 31, 2012; or 

(ii) such other compliance date as may 

be determined by the Commission; 

except that, for agreements, contracts, 

and transactions executed on an exempt 

commercial market (‘‘ECM’’), exempt 

board of trade (‘‘EBOT’’), or pursuant to 

CEA section 2(d)(2) as in effect prior to 

July 16, 2011 (‘‘2(d)(2) Market’’), this 

exemption shall expire upon the earlier 

of (i) December 31, 2012; or (ii) the 

effective date of the designated contract 

market (‘‘DCM’’) or swap execution 

facility (‘‘SEF’’) final rules, whichever is 

later, unless the ECM, EBOT, or 2(d)(2) 

Market files a DCM or SEF registration 

application on or before the effective 

date of the DCM or SEF final rules, in 

which case the relief shall remain in 

place during the pendency of the 

application. For these purposes, an 

application will be considered no longer 

pending when the application has been 

approved, provisionally approved, 

withdrawn, or denied. 

(4) Provided that the foregoing 

exemptions in paragraphs (1), (2), and 

(3) above shall not: 

a. Limit in any way the Commission’s 

authority with respect to any person, 

entity, or transaction pursuant to CEA 

sections 2(a)(1)(B), 4b, 4o, 6(c), 6(d), 6c, 

8(a), 9(a)(2), or 13, or the regulations of 

the Commission promulgated pursuant 

to such authorities, including 

regulations pursuant to CEA section 

4c(b) proscribing fraud; 

b. Apply to any provision of the 

Dodd-Frank Act or the CEA that became 

effective prior to July 16, 2011; 

c. Affect any effective or compliance 

date set forth in any rulemaking issued 

by the Commission to implement 

provisions of the Dodd-Frank Act; 

d. Limit in any way the Commission’s 

authority under section 712(f) of the 

Dodd-Frank Act to issue rules, orders, or 

exemptions prior to the effective date of 

any provision of the Dodd-Frank Act 

and the CEA, in order to prepare for the 

effective date of such provision, 

provided that such rule, order, or 

exemption shall not become effective 

prior to the effective date of the 

provision; and 

e. Affect the applicability of any 

provision of the CEA to futures 

contracts or options on futures 

contracts, or to cash markets. 

In its discretion, the Commission may 

condition, suspend, terminate, or 

otherwise modify this Order, as 

appropriate, on its own motion. This 

final order, as amended, shall be 

effective immediately. 

Issued in Washington, DC, on May 10, 

2012 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Appendices to Proposed Order 

Amending the Second Amendment to 

July 14, 2011 Order for Swap 

Regulation—Commission Voting 

Summary and Statements of 

Commissioners 

Note: The following appendices will not 

appear in the Code of Federal Regulations 

On this matter, Chairman Gensler and 

Commissioner Sommers, Chilton, 

O’Malia and Wetjen voted in the 

affirmative; no Commissioner voted in 

the negative. 

Appendix 1—Chairman Gary Gensler 

I support the proposed exemptive 

order regarding the effective dates of 

certain Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank Act) provisions. Today’s 

proposed exemptive order makes four 

changes to the exemptive order issued 

on December 19, 2011. 

First, the proposed exemptive order 

extends the sunset date from July 16, 

2012, to December 31, 2012. 

Second, the Commodity Futures 

Trading Commission (CFTC) and the 

Securities and Exchange Commission 

have now completed the rule further 

defining the term ‘‘swap dealer’’ and 

‘‘securities-based swap dealer.’’ Thus, 

the proposed exemptive order no longer 

provides relief as it once did until those 

terms were further defined. The 

Commissions are also mandated by the 

Dodd-Frank Act to further define the 

term ‘‘swap’’ and ‘‘securities-based 

swap.’’ The staffs are making great 

progress, and I anticipate the 

Commissions will take up this final 

definitions rule in the near term. Until 

that rule is finalized, the proposed 

exemptive order appropriately provides 

relief from the effective dates of certain 

Dodd-Frank provisions. 

Third, in advance of the completion 

of the definitions rule, market 

participants requested clarity regarding 

transacting in agricultural swaps. The 

proposed exemptive order allows 

agricultural swaps cleared through a 

derivatives clearing organization or 

traded on a designated contract market 

to be transacted and cleared as any other 

swap. This is consistent with the 

agricultural swaps rule the Commission 

already finalized, which allows farmers, 

ranchers, packers, processors and other 

end-users to manage their risk. 

Fourth, unregistered trading facilities 

that offer swaps for trading were 

required under Dodd-Frank to register 

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Federal Register / Vol. 77, No. 95 / Wednesday, May 16, 2012 / Proposed Rules 28823 

25See Effective Date for Swap Regulation, 76 FR 

42508 (issued and made effective by the 

Commission on July 14, 2011; published in the 

Federal Register on July 19, 2011). 26The proposed amendment to the July 14 Order 

also seeks to: (1) Remove references to the entities 

terms in Sections 712(d) of the Dodd-Frank Act, 

including ‘‘swap dealer,’’ ‘‘major swap participant,’’ 

and ‘‘eligible contract participant’’ in light of the 

final, joint CFTC-Securities and Exchange 

Commission rulemaking further defining those 

terms on April 18, 2012; (2) allow the clearing of 

agricultural swaps; and (3) removing any reference 

to the exempt commercial market and exempt board 

of trade grandfather relief previously issued by the 

Commission. 

27See Commodity Futures Trading Commission 

Chairman Gary Gensler, Remarks before 

International Swaps and Derivatives Association’s 

27 Annual General Meeting (May 2, 2012), available 

at http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/opagensler-112. 

as swap execution facilities (SEFs) or 

designated contract markets by July of 

this year. These facilities include 

exempt boards of trade, exempt 

commercial markets and markets 

excluded from regulation under section 

2(d)(2). Given the Commission has yet 

to finalize rules with regard to SEFs, 

this proposed order gives these 

platforms additional time for such a 

transition. 

Appendix 2—Statement of 

Commissioner Scott D. O’Malia 

I concur in support of the 

Commission’s proposal to further 

modify the temporary exemptive relief 

provided in the Commission’s final 

order dated July 14, 2011 (the ‘‘July 14 

Order’’).25 In the July 14 Order, the 

Commission addressed concerns raised 

by industry regarding the applicability 

of various regulatory requirements to 

agreements, contracts and transactions 

after the effective date of Title VII of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (‘‘Dodd-Frank 

Act’’). Today’s proposal would, among 

other things, extend the temporary 

exemptive relief from last extension 

date (i.e., July 16, 2012) to December 31, 

2012.26

Based on the Chairman’s statements at 

a recent industry conference,27 I am 

supportive of the Commission’s 

proposed amendment to the July 14 

Order to the delay application until the 

end of the year or until the 

implementation. However, I understand 

that unless the Commission focuses on 

its priorities, it seems unlikely we can 

meet this schedule. 

Assuming that we complete all DoddFrank Act-related rules, orders and 

guidance by the end of 2012, I think this 

proposed amendment is appropriate and 

will provide the industry with needed 

comfort that the new swaps regulatory 

regime will not unduly disrupt current 

market practices. 

Notwithstanding today’s proposed 

amendment, I believe that market 

participants continue to seek guidance 

regarding the timing of the 

Commission’s remaining rules. I 

frequently hear that the Commission’s 

rules are not sequenced in a manner that 

provides them with the certainty they 

need to make budgeting, investment and 

hiring decisions. 

For that reason, I have included along 

with my statement a list of the 

remaining Commission rules, orders and 

guidance, as well as a timetable of when 

I understand the Commission expects to 

vote on those rules, orders and 

guidance. I have developed this list and 

timetable based on my knowledge and 

through my conversations with 

Commission staff. I strongly urge the 

public to provide comments on this list 

and timetable. I also ask that the public 

answer whether: (1) The Commission’s 

year-end deadline is achievable; and (2) 

the sequencing of these rules, orders 

and guidance is appropriate? 

While I support the proposed 

amendment to the July 14 Order, I 

believe that the Commission’s 

accelerated rulemaking schedule will 

likely result in many unforeseen perils. 

For example, to address many of the 

problems arising out of the 

Commission’s final rulemaking for large 

trader reporting for physical commodity 

swaps, the Commission issued 

temporary and conditional relief and a 

guidebook. These actions were intended 

to act as a Band-Aid fixing what the 

Commission could have addressed in 

the final rulemaking if it were not 

rushed. 

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28824 Federal Register / Vol. 77, No. 95 / Wednesday, May 16, 2012 / Proposed Rules 

[FR Doc. 2012–11838 Filed 5–15–12; 8:45 am] 

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